John Osmond argues that the Silk Commission has a much broader canvas than originally envisaged

October 26th, 2011

The devolution process is accelerating, not only in Scotland where last weekend the SNP launched its campaign for the independence referendum with the slogan “Scotland – its Starting’, but in Wales as well. In the last few weeks we have seen three remarkable developments.

First was the formation of the Silk Commission which will be examining the National Assembly’s fiscal powers and the wider devolution settlement. What has already become clear in the few short weeks since this announcement is that Paul Silk, the National Assembly’s former Clerk, and his colleagues will have a substantially wider agenda than the bare bones of their terms of reference would suggest.

This is partly because of two other parallel developments within Wales. First are separate talks on the reform of the Barnett formula that determines the Assembly’s block grant coupled with the Welsh Government’s borrowing powers, that are underway between the United Kingdom Government and the Welsh Government. Second was the First Minister’s announcement earlier this month that he intends on publishing a Green Paper on creating a legal jurisdiction for Wales in the New Year. In an address to a Legal Wales conference in Cardiff Carwyn Jones said:

“The Welsh Government is acutely aware that devolution law has added to the complexity of the statute book and we are looking at ways of improving accessibility including consolidation of the law applying to Wales. There is the issue of jurisdiction and how far we go down the road of creating a distinctive legal jurisdiction for Wales. Is it inevitable, now that the Assembly has primary law-making powers, that we must move in this direction and if so what would we need to do to achieve it?”

Plainly, Carwyn Jones’ answer to the first question is Yes, with far reaching consequences for Welsh institution building and Wales’ place within the United Kingdom. But it is developments in Scotland that, as ever, are proving the main impetus to the devolution process.

It’s not just the launch of the SNP’s campaign for the referendum, boosted by £918,000 bequeathed to the party by the poet Edwin Morgan which will be devoted to persuading the people of Scotland to vote Yes. Equally important are signs that the Scottish Labour Party is positioning itself to campaign on what Salmond confirmed at the weekend will be a second question on the ballot paper, for what us known as ‘devo-max’ – that is, full fiscal autonomy for Scotland within the union.

The case was made on Scottish Labour’s website last week by Malcolm Chisholm, MSP for Edinburgh Northern and Leith who was a Scottish Government Minister from 2001 until 2006. As he wrote:

“Scottish Labour is currently caught on the Calman hook and needs to get off it fast if we are to create a Parliament with meaningful financial powers. The Scottish Government is finding life easy not just because of our failings but because the current constitutional arrangements are ironically ideal for enhancing its popularity. All problems can be blamed on Westminster, with a great deal of justification in many cases, while the Scottish Government can claim credit for any improvements that do take place. The situation is particularly urgent because a Westminster government making big cuts was always going to be the best opportunity for the SNP to secure its ultimate goal.

“Scottish Labour must respond by developing a Devo Max position. To be pedantic, that does not have to mean the greatest possible devolution but certainly means very great devolution. We should therefore not just look at what has come to be called Devo Max – that is, the devolution of all taxes and revenues to Scotland – but also at intermediate positions such as the Devolution Plus advocated by Reform Scotland. That organisation is too right wing in its general policy positions for most of us but it talks a great deal of sense when it comes to the constitution. Reform Scotland believes that since the Scottish Parliament is responsible for about 60 per cent of Scottish public expenditure then the Scottish Parliament should have access to a range of taxes that covers about 60 per cent of Scottish tax revenues. We should certainly explore that position and variants of it as well as the ultimate Devo Max option. A key part of our consideration must be how much of social security expenditure should be devolved, but we should be in no doubt that demands for that will grow as the massive social security cuts from Westminster kick in.

“I believe that Devo Max in some form is the right position for the good governance of Scotland and the best way of ensuring that Scottish priorities are to the fore in all domestic policy areas. Those who are not convinced of that should perhaps reflect that nailing our colours to Calman and the Scotland Bill will boost the independence vote in the forthcoming referendum, as evidenced a few weeks ago when two well-known Labour figures told me they would vote for independence if the alternative was Calman. We need a three question referendum and Labour has to define what Devo Max means as a matter of urgency.”

So it is looking increasingly likely that, even if Scotland does not vote for independence in its referendum, it will at the very least opt for ‘devolution max’. And however that is framed it will have substantial consequences for the rest of the United Kingdom, not least Wales. Inevitably, it will entail a fundamental recasting of the fiscal relationship between Westminster, Wales and Northern Ireland for a start.

As important it will bring into much sharper focus for the English their position in relation to the rest of the British Isles with consequences that we can only dimly foresee at the present. And how long will Scotland be satisfied with devo-max in any event? As I say, it turns out that the Silk Commission has a much broader canvas that was envisaged only a few weeks ago.

12 Responses to:“The accelerating devolution process”

Oct

26

8:40 am

Jeff Jones says:

What about the £41 billion black hole that the Scottish Office pointed out this week would have existed in Scottish finances if Scotland were independent? Perhaps the IWA could work out the financial consequences of Wales of the devo max option. If devo max is good enough for Scotland then there are a lot of English voters who might argue that it should also be good enough for Wales and Northern Ireland. On the separate legal jurisdiction for Wales which I’m sure is supported by many in the legal profession who always put the bank balace first, where is the money going to come for yet another example of gesture politics? Wouldn’t it be nice as Eluned Morgan correctly pointed out last week if our politicians actually concentrated on the issues that real concern most voters such as the economy and employment.

“Wouldn’t it be nice as Eluned Morgan correctly pointed out last week if our politicians actually concentrated on the issues that real concern most voters such as the economy and employment.”

In fairness, there is a weekly dissecting of the UK Government’s economic and employment policies at the Assembly. Plaid Cymru has also been putting pressure on the Welsh Government to reveal their own economic plans and there has been some movement on that front, with the expectation of more clarity on capital investment by the end of the year. So it isn’t true that the Welsh poltiicians aren’t focusing on the economy. But that aside, the current devolution settlement ensures that it is Westminster that is supposed to concentrate on the economy and employment. Apart from business support (and there is a valid debate to be had about how that is delivered and particularly what sectors should be focused on), the Welsh Government’s role is limited to skills and education, and some road-building and transport policies (but not full accountability for Network Rail, or a fair share of its investment). In fact, I can remember Jeff’s critique being utilised by opponents of law-making powers. They postulated that issues like the Welsh language, constitutional affairs and cultural issues took up all the Assembly’s time. It isn’t true. The future of Wales’ economy and employment prospects is linked in to the questions John Osmond is raising about funding.

Jeff, you are quite correct to point out that Scotland would have a deficit of £41bn if she was independent. BUT, as treasury figures have also point out that being a part of the UK means that Scotland has a deficit of £60bn

Bit of an “own goal” there Jeff but you are of course in good company. In their efforts to stymie Scottish aspirations a British Government report was commissioned in 1975. Unionists mocked any idea of Scottish Home Rule, with comments like “The Scottish economy would be a basket case economy”. It was with complete confidence that the Whitehall report was undertaken which would undoubtedly show how fragile the Scottish economy was. Unfortunately like your own example it backfired on the Britnats so they buried it for a full 30 years.
When it was eventually published it showed the exact opposite to what the Britnats hoped. The Scottish economy with its oil revenue would have a healthy surplus rather than the deficit of the British state. Indeed it showed Scotland’s economy would have been one of the strongest in the world. Still, shows you are carrying on with a Britnat tradition of “massaging the facts”. Hardly surprising that more and more people are questioning the Status-Quo.

Jane. How would an Independent Scotland have dealt with the antics of Fred Goodwin and co? In my view the UK government should really call Salmond’s bluff and set a date for a referendum with only one question on it which will centre around whether the people of Scotland want Independence or not. Once that happens then we can have a real debate and not the fantasy land politics of the SNP. It’s easy to talk about the possible benefits of independence without actually talking about the fianancial implications of issues such as the share of the UK’s National Debt. The SNP haven’t even thought through the consequences of retaining the pound after independence. If Scots say yes after being presented with the full facts then it will not be the end of the world as we know it. This isn’t 1914 where opposition to independence for Ireland often centred around strategic issues and the need to protect the Protestant minority. As for the Assembly we will never have mature poltics until it raises most of the revenue it spends as local government used in the past and as my town council does at the moment. Reform of Barnett is really an irrelevant distraction from the real issue which is the present ‘representation without taxation.’ It’s easy spending other people’s money and then blaming them when you don’t have enough. Much harder to actually be directly responsible for taxation and then having to persuade taxpayers that you are going to spend their money in a way that will add to their prosperity. Dissecting another political institution’s economic policies on a weekly basis is frankly the equivalent of 1970s student union politics.

Jeff says
“It’s easy to talk about the possible benefits of independence without actually talking about the fianancial implications of issues such as the share of the UK’s National Debt”

Actually, Jeff, the £41bn deficit that I mentioned included Scotland’s share of the national debt. Including foreign wars etc. It’s more likely that the Scottish debt would be even less if they were independent as the Scots are less likely to have the same foreign policy as the UK.

Looks even rosier for Scotland if you want to discuss national debt. And this is without mentioning the oil revenues.

“Dissecting another political institution’s economic policies on a weekly basis is frankly the equivalent of 1970s student union politics”

That’s never stopped you from attacking the Welsh Government’s economic record though, has it? And supporting what Westminster says about the Welsh Government.

“How would an Independent Scotland have dealt with the antics of Fred Goodwin and co”

Nice try at smoke and mirrors, dear boy. At the end of the day, British nationalists like yourself, Jeff, will have to realise that Scotland would be better off if independent. The figures are there, as the SoS has so kindly gifted to the SNP.

“In my view the UK government should really call Salmond’s bluff and set a date for a referendum with only one question on it which will centre around whether the people of Scotland want Independence or not”

Something tells me (I have been an investment banker for half a decade amongst other things) that ‘Fred the Shred’ would have found it profoundly difficult to have shipwrecked RBS in an independent Scotland. The uncritical acclaim he was used to would have been absent even before things started to go wrong, because he would have never been encouraged to steer the bank out of its competences.

Jane What about the legal advice that Scotland would have to apply to join the EU if there is a vote for Independence? All the existing members of the EU would have to agree to the accession of a new member. I wonder what the Spanish reaction would be? It could take years and in the present climate I wonder how the markets would react to the uncertainty. It seems that the road to Independence is going to be a bit more complicated than some simple souls in the SNP seem to realise. As for foreign wars if Scots Nats are so opposed to the UK’s activites then why are they campaigning to keep RAF bases in Scotland such as Lossie mouth open? Perhaps you could also explain where the shipyards now constructing aircraft carriers for a UK Navy will get work in the future. As for Scotland and investment bankers, being independent didn’t stop bankers in either Iceland or Ireland from gambling with the futures of their banks. As some commentators have rightly pointed out we had a Scottish not a UK banking crisis. Where would an independent Scotland have found the billions that were pumped in by a UK government to save Scottish banks? Whatever happened to the Arc of Prosperity that nationalists were so fond of boasting about a few years back?

The Sctos are past the stage that the Welsh are at now. While we are still very self concious and a little shy, the Scots are storming ahead with nation building. Ten years ago it might not have been the case but today, the Scots would react very angrily to any Britnat telling them what to do, and if the UK Government “called Salmond’s bluff” and called a referendum now, the Scots would undoubtedly vote for it not least because of the arrogance of the UK government to think they can do such a thing when it is not to do with them.

For Britnats, this Scottish independence issue is a hugely delicate one. Salmond knows what he’s doing, and the Britnats have to be very careful in how they approach their counter attack. For example, who are they going to put up to fight for the union against Alex Salmond? The Tories can’t put anyone up because the Scots hate them, Labour are in dissaray in Scotland, and to put an English Westminster Labour MP up wouldn’t be very wise. The Lib Dems have all but disappeard so that leaves a very small pool of Scottish Westminster MPs. It’s a huge decission for the Britnats… looking forward to seeing how they pick!

Scottish economist John Kay was interviewed about Scottish independence on Radio 4 the other week; if I remember rightly, he made the points that (a) Scotland would certainly be viable as an independent state; (b) ending the union would entail a series of complex negotiations about cross-border financial liabilities, but these could be worked out with goodwill on both sides; and (c) independence would not in itself confer any economic advantage to Scotland – this would depend entirely on the policies pursued by the Scottish Government (and presumably also the Bank of England’s Monetary Policy Committee, since the SNP advocates retaining the currency union).

But what of all this for Wales? I think in these discussions we have to bear in mind the differences between the situation here compared to Scotland. The Holtham Commission highlighted the small size of the Welsh tax base, whereas Scottish revenues are much higher. We are also more closely integrated with the English economy: most Welsh people live quite close to the border and the number of commuters crossing it each day is something like three times the number crossing the Scottish border. An independent Wales would have more freedom of economic policy, but the realities of economic geography suggest that it would face far more challenges and constraints than Scotland.

The point I made about an Independent Scotland and entry to the EU is in a report which has been written for the Scottish Affairs Select Committee and which is highlighted in the Scotsman on November 9th.